Falklands oil unviable - Desire Petroleum

LONDON (Reuters) - Oil explorer Desire Petroleum DES.L will report that oil discovered in test drilling off the Falkland Islands is not commercially viable, The Sunday Times reported, citing industry sources.

The newspaper said Desire was expected to say that while it had found oil, there was not enough to justify developing the field.

Drilling by the company of the first well in the region in over a decade ignited protests from Argentina, which claims the British territory.

Buenos Aires said the exploration was a breach of its sovereignty, but Britain, which established rule in the islands in the 19th century and defeated an Argentine invasion of the islands in 1982, rejected the complaint.

Analysts had said the prospect could contain reserves of up to 400 million barrels, but the risk of hitting nothing was also seen as high.

Three other explorers are planning to drill in the area: Falkland Oil and Gas FOGL.L, Rockhopper Exploration RKH.L and Borders and Southern Petroleum BSTH.L

A spokesman for Desire said on Sunday that tests were ongoing, and the company would issue a statement on Monday morning clarifying the situation to shareholders.

Reporting by Paul Sandle, editing by Will Waterman